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Inflation slows to 2% after 7-month high
Aggregated Source: Shanghai Daily: Business

CHINA'S inflation growth slowed to 2 percent in January after December's seven-month high of 2.5 percent, the National Bureau of Statistics said yesterday.

The slowdown was mainly because of a higher comparative base and steady food supplies. Analysts said moderately rising inflation was to be expected in the longer term due to better economic conditions and higher production costs.

Food prices, nearly a third of the Consumer Price Index basket, rose 2.9 percent from a year earlier in January, down from December's 4.2 percent. The non-food sector stayed flat at 1.6 percent.

"A weaker CPI this January is expected because of very high inflation a year ago," said Lian Ping, chief economist at Bank of Communications. "For the longer term, the CPI will be powered by a recovering economy, rising wages and higher prices for resources."

In January last year, China's consumer prices rose 4.5 percent, the highest level in the year.

Some analysts said the easing of inflation growth last month was likely to be temporary.

Lu Zhengwei, chief economist at Industrial Bank, said the trend would be an accelerating CPI, but growth would remain modest.

"It is unlikely to have rates as high as 4 percent like those a few years ago," Lu said.

However, Zhou Hao, an economist at Australia & New Zealand Banking Group Ltd, said the CPI could exceed 3 percent this month, and that as confidence in the Chinese economy strengthened, resulting in large inflows of capital, high inflation may be seen in the second half.

Neither of Lian and Lu expected any aggressive policy changes in the near future. Zhou said the monetary policy stance would likely shift from neutral to tightening after March.

The Producer Price Index, the factory-gate measure of inflation, fell 1.6 percent year on year in January, narrowing from December's drop of 1.9 percent.

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